Home > Market change > Zamin weighs up London flotation

Zamin weighs up London flotation

July 26, 2010

“Zamin, a Brazilian iron ore company, is considering a London flotation.

The company’s decision to look at a London listing comes just weeks after Ferrous Resources, another developer of Brazilian iron ore mines, cancelled its planned London offering, citing volatile markets and a mixed outlook for the raw material that makes steel. …”

Zamin expects its principal mine in Bahia state – called Bahia Mineracao, or Bamin – to cost $1.8bn to build. The project is half-owned by Eurasian Natural Resources Corp, the London-listed Kazakh miner.

Source: Financial Times, July 26, 2010

Observations:

  • Zamin needs to raise equity in order to develop its Bamin deposit, a 41% 2.4bln ton deposit which is located close to the areas most important railroad.
  • Apart from the flagship Bamin deposit, Zamin owns the rights to deposits in Urandi (Brasil) and Valentines (Uruguay).

Implications:

  • Iron ore price volatility will cause potential of cash amounts raised in the IPO to be rather low. However, no other resources companies will be interested in buying a stake as they will not be able to gain control as long as ENRC holds 50% of the project.
  • Zamin will try to benefit from the higher iron ore price caused by the new pricing mechanism and will try to leverage the expertise of its management team in managing iron ore projects in Brasil in gaining investor’s trust.

©2010 | Wilfred Visser | thebusinessofmining.com

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